Tesla (NASDAQ: TSLA) shares dropped over 2% in the early trading hours Monday, adding to its year-to-date decline of 29.25%, positioning it as one of the worst performers in the S&P 500 for 2024.
Tesla (TSLA) is experiencing stock weakness on Monday, with Citi equity analysts identifying two primary factors contributing to the decline.
Firstly, the launch of Xiaomi’s (OTC: XIACF) SU7 vehicle with its competitive pricing range has sparked concerns about heightened competition within the already bustling China New Energy Vehicle (NEV) market. Analysts fear this could threaten Tesla’s market position in the region.
On March 28, Xiaomi unveiled its debut electric vehicle (EV), the SU7, and introduced the SU7 Pro edition, previously unannounced during the soft launch. This expanded lineup offers more variety and competitive pricing, with the base model priced at Rmb215.9k, the SU7 Pro at Rmb245.9k, and the SU7 Max at Rmb299.9k, aligning with initial price range expectations of Rmb200-300k.
Citi analysts said,
“We currently forecast EV shipment of 60k/131k/252k units for 2024/25/26E.”
Secondly, ongoing concerns about Tesla’s first-quarter deliveries continued to dampen investor sentiment. Several Wall Street analysts have slashed their delivery estimates in recent days, adding to the bearish outlook for the stock.
Deutsche Bank analysts, in particular, cut their price target on Tesla stock this week, citing concerns about pressure on margins and earnings. They noted Tesla’s previous price cuts in China and Europe and moderate price adjustments in February, raising questions about sustained demand despite announced price hikes in April.
While the immediate impact on Tesla shares was negative, Citi analysts perceive this situation as a broader indicator of the undervalued potential within the traditional automotive sector.
Citi analysts noted,
“Looking beyond Tesla, events such as this reinforce our long-held positive view around the overlooked value of GM’s and Ford’s respective NA Truck/Commercial franchises–end markets showcasing both strong growth & defensive qualities.”
Tesla (NASDAQ: TSLA) Stock Reaction
TSLA stock declined 2.25% to close at $175.79 on Thursday. The traders had exchanged hands with 77,654,840 (77.65 million) shares compared to the average daily trading volume of 102.66 million.
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